Questions and Answers of Accounting Theory Conceptual

Why does post-earnings-announcement drift appear to be more pronounced with smaller firms?What could be done from a company perspective to rectify this situation? What could be done from a standard
There is evidence that investors do not fully recognize the valuation effects of severe pension underfunding. (See, for example, Franzoni and Marin [2006]). Why do you suppose this is the case? What
Is Cadenhead’s conception of circumstantial variables as the only permissible departure from prescribed accounting methods closer to finite or rigid uniformity? Explain.
How do protective and informative disclosure differ?
SFAS No. 13 in effect regards a lease period of 75% or more as a relevant circumstance in distindsuishing between capital and operating leases. What economic factors (cash flow differentials)lie
What are the possible benefits of a disclosure process that is integrated with major policies in marketing, production, and finance? Do you think only “good news” items should be disclosed?Why or
Do you think that disclosures of smaller firms have more information content than disclosures for larser firms?
What is meant by the phrase “degrees of representational faithfulness?”
Firms A and B are exactly the same size as Firm C and Firm D. Firm A acquires for cash 100% oft he common stock of Firm C. Firm B acquires 100% of Firm D by exchanging one share of its own stock for
What is the relationship between the IFAC and IASB2
What are the main distinctions between the Anglo-American and the continental models?
How does the role of Sovernment differ in the United Kingdom and the United States relative to financial reporting?
Why do the rules-based and principles-based approaches to standard setting tend to converge, as Schipper sees it?
Why are asset and liability definitions important to the theoretical structure of accounting? Why are definitions important to policy-setting bodies?
What do aggregated balance sheet totals represent? These balance sheet data are used for ratio analysis. How useful do you think ratio analysis is? Explain.
Why have mutually unperformed executory contracts traditionally been excluded from financial statements? Can this practice be justified in terms of asset and liability definitions? How relevant is
Why is it difficult to determine the historical acquisition cost of self-constructed assets? Do definitions of accounting elements and general principles of recognition and measurement resolve the
Is the “available for sale” category for debt and equity securities used in SFAS No. 115 a homogeneous category? Explain.
SFAS No. 133 (213 pages), 149 (78 pages), and 155 (27 pages) define standards for derivatives in 318 pages. How do you think a principles-based approach to setting standards would affect their
Why are interest rate swaps a zero-sum game?
Four points in the revenue cycle, from production through to cash collection, are possible events for revenue recognition. What relevant circumstances would justify finite uniformity rather than
Why is less really more with SFAS No. 128 on earnings per share?
Is the FASB correct in attempting to separate stock options from stock appreciation rights that are payable in cash?
Does the “fineness” issue arise in the handling of capitalized interest costs (SFAS No. 34) relative to the treatment oft his item in SFAS No. 952 Explain.
In addition to inflation subsiding, what other reasons underlie why SFAS No. 33 would most likely have failed?
Are observable inputs always specific prices? Explain.
Does the nonperformance factor relative to the firm work against it or for it?
SFAS No. 157 is exit-value oriented; hence no entry value numbers may be used. Is this statement correct?
Costs of identical assets will always be a Level 1 measurement under SFAS No.
Is this statement correct? Explain.
In-use and in-exchange categories play no role relative to liability measurement in SFAS No.
What is a “market specific” versus an “entity specific’ measurement, and does this distinction hold? Explain.
Refer to Exhibit 15.8. Under SFAS No. 96, there was a “conservative” recognition of deferred tax assets.As aresult, the $135 deferred tax asset in 1997 would need to be “carried back” to
How did the “give-and-take” differ between the FASB and its constituents in the drafting of SFAS No. 87 on pensions versus on SFAS No. 1062
According to a Wall Street Journal article from February 1, 1996 (Lowenstein, p. C1), pension fund assets in the United States grew dramatically—by approximately 29%—during 1995, an excellent
While ERISA has been helpful, how well are employees protected in situations in which overfunded pension plans exist?
Why is the conveyancing aspeci of leases emphasized in capital leases and the contractual element emphasized in operating leases?
How is representational faithfulness achieved in the capitalization requirements of SFAS No. 132
Evaluate the manner in which initial direct lease costs are accounted for under SFAS No. 13 for sales-type and financing-type leases.
Why was there some reason to expect negative economic consequences arising from lease capitalization?What is the role of neutrality in such a situation? What has been the response based on research
Why is the IASB standard on leases (IAS 7) substantially shorter than the FASB’s standard (SFAS No. 13)?
What is meant by the term one-line consolidatioWnh?at differences occur in financial statements when a one-line consolidation rather than full consolidation is used2
What are some reasons that consolidated reports are thought to be relevant?
Distinguish among sell-offs, spin-offs, split-offs, and split-ups.
Do you think that the cash flow statement is more “factual” and less “interpretative” than the income statement and balance sheet?
Why has ljiri advocated the need for a conceptual framework to implement accountability?
The viewpoint has been expressed that financial statement preparers are also the largest class of users of financial statements. Hence, the preparer has a “unique ability” to recognize user needs
What is the relationship between “stewardship” and “accountability”? Discuss.
If a division manager of a firm were fired due to poor operating results, would this be an example of stewardship? Why or why not?
How does the freedom from bias mentioned in ASOBAT compare to the quality of neutrality mentioned in SFAC No. 2?
What is comprehensive income?
Is neutrality consistent with the external user primary orientation of SFAC No. 1 and the pervasive constraint (benefits outweishing costs) of SFAC No. 2?
SFAC No. 6 is largely a repetition of SFAC No.
Discuss two possible reasons why this repetition occurred.
Verifiability is part of reliability in SFAC No.
How does verifiability differ from the older concept of objectivity, and which do you think is more restrictive?
Conservatism is discussed in paragraphs 91-97 of SFAC No.
Why is its role in SFAC No. 2 rather ambiguous?
What type of measurement scale (nominal, ordinal, interval, or ratio scale) is being used in the following situations?Musical scales Insurance risk classes for automobile insurance Numbering of pages
If Seneral price-level adjustment is concerned with the change over time of the purchasing power of the monetary unit, why is it not considered a current-value approach?
Political factors are an adverse influence upon the accounting standard-setting function. Discuss this statement.
Every fall, U.S. News and World Report comes out with a much awaited ranking of American colleges and universities (you may have even used it yourself). Although there has been much criticism of the
Accounting rule making should only be concerned with information for investors and creditors.Discuss this statement.
Of the four disciplines in the following list, which do you think qualify as sciences and which do not? State your reasons very carefully.a. Lawb. Medicinec. Cosmetologyd. Accountancy
How did the APB pave the way for the FASB2
What is the relationship between the National Commission on Fraudulent Financial Reporting and the Private Securities Litigation Reform Act of 19952
Adistinction was made in the chapter between two types of regulation: (1) the refinement and standardization of financial statements and (2) expanded disclosure. Why is the distinction important in
What is Pareto-optimality? Why would adherence to it minimize accounting standard setting?
Would a regular quarterly announcement of earnings-per-share that is “good” be an example of signaling?What about early adoption of a new accounting standard that would reduce income?
Evaluate Ronen’s (2002) financial statement insurance proposal.
Does the ability to swiftly—and at no cost—download music files convert this music from a private 600d to a public good?
Do you think that the so-called equity theories of accounting are really theories in the scientific sense? How would you classify them?
What is the difference between owners’ equity accounts representing shareholders’ claims as equity holders and shareholders’ interests as owners?
Is it fair to categorize ARS 1 and ARS 3 as failures? Why or why not?
How do conventional retained earnings differ from entity equity under the Anthony conception of the entity theory?
Why is the earnings-per-share calculation an example of the residual equity of a firm being broader than merely its current common shareholders?
Why is the residual equity theory more in line with Clark’s assessment of recent research in finance than entity and proprietary theory?
Why do you think that profitability ratios (e.5., return-on-assets) are more sensitive to the combined effect of immateriality items than would be the case with solvency ratios (debt-to-equity and
Provide a definition of a theory.
Distinguish between a theory and a standard.
Is the definition of a theory, provided by Most, appropriate?Propose some arguments to support your answer.
Why the conceptual framework cannot be a theory?
How would you describe the presence of the political aspect in the accounting standard-setting process?
What is a social institution?
Which elements constitute the accounting institution?
Gabri´e and Jacquier argue about some fundamental contradictions between the market and the firm. Comment.
Comment the statement proposing that information able to satisfy the investors will automatically satisfy most other needs expressed by other stakeholdersa. What is a stakeholder?b. Why the
Is the use of numbers enough to classify accounting as a mathematical discipline?
Are sciences telling the truth?
Kant proposed a distinction between analytical and synthetic statements.What did he mean?
Is mathematics a science as physics or chemistry?
Is economics a science?
What is an analysis following the institutional theory and why is it relevant in the case of “accounting”?
What is positivism? Is it a method?
By which process do researchers believe that statistics generate objectivity?
How would you define objectivity?
“The firm is a planned economy under an authoritative control.”Comment.(When the firms reach sizes that are larger than many countries [calculated from the GIP vs the sales], the “free”
The market for accountinga. Why the firm and the accounting statements can be said to be market failures?b. What to say about the existence of those markets followed so closely in the news?
What is hyperreality? How can it be applied to accounting? Provide an example that is not in the book.
What do you think of the statement: “accounting theory has no standard definition”?

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